How Uber Conquered The World In 2013

Since its launch in mid-2010, transportation-on-demand startup Uber has grown from its San Francisco roots to more than 60 cities across six continents. And according to widely circulated internal documents published by Valleywag in early December, the company is on track to beat investor expectations and bring in more than $200 million in revenue by the end of 2013.

But as popular as the service has been with investors, Uber has tangled more or less continuously with existing transportation businesses and regulators who’ve sought to shut the service down. In response, Uber’s waged an aggressive public relations campaign to defend its business and pricing models.

The company, founded by serial tech entrepreneurs Travis Kalanick and Garrett Camp, launched its service in May 2010 under the name UberCab, offering San Francisco customers a digital cross between a taxi company and a car service. Users could summon a car through an iPhone app, Uber’s website, or by text message. Then as now, the cars and drivers come from traditional car services, but Uber’s system uses GPS systems to locate and dispatch a nearby vehicle and let customers track the car’s approach through the app.

"Once you make a request to an UberDriver you can watch his exact moves to your arrival," the company explained on a frequently-asked-questions page posted at the time. "This means that you can count on his arrival and be confident to make your flight or meeting on time."

At the end of the ride, Uber’s systems seamlessly bill the passenger’s credit card based on the time and distance traveled, charging rates then advertised as being about 1.5 times the cost of an equivalent taxi ride.

From the launch, Uber made clear its plans to disrupt the taxi industry in San Francisco, where residents have often complained that the low number of taxi medallions has led to long waits and poor service.

"Garrett’s big idea was cracking the horrible taxi problem in San Francisco—getting stranded on the streets of San Francisco is familiar territory for any San Franciscan," Kalanick wrote on the company blog in December 2010. The FAQ page, too, distinguished the service from other taxi-summoning apps, since it bypassed the medallion cab system altogether.

"Other apps are build [sic] upon a broken taxi system. Their customer experience regardless of how great the app is will be terrible," the page explained. "Our network of limo drivers and car services are clean and professional, providing an on-demand and elite experience."

The service quickly got rave reviews from tech luminaries like TechCrunch’s Michael Arrington, who compared the service to other disruptive startups like payment processor Square and vacation rental marketplace Airbnb.

But, just as Airbnb has incurred the wrath of regulators who say it illegally circumvents hotel safety regulations and restrictions on short-term apartment rentals, Uber quickly drew the ire of the San Francisco Metropolitan Transportation Agency and the California Public Utilities Commission. The agencies alleged the company was illegally operating without either a taxi or car service license and warned of the possibility of thousands of dollars in fines and even potential jail time for Uber officials.

Uber said at the time it believed it was in compliance with the law and intended to continue operating in San Francisco. And, "to avoid confusion," the company removed "cab" from its name, after the Public Utilities Commission cited a rule barring car services from advertising their businesses as taxi companies.

"We will continue full speed ahead with the mission of making San Francisco city a great place to live and travel," the company wrote on its blog .

As Uber expanded into more markets, it faced more challenges from local transportation regulators. In Washington, the D.C. Taxicab Commission fined an Uber driver and even impounded his Lincoln Town Car in January 2012, saying that under Uber’s pricing plan, car services were illegally charging by the mile, a privilege reserved for taxis.

Later that year, local and state officials in Cambridge, Mass., ticketed an Uber driver for operating without a proper license and for using Uber’s GPS-based meter, which hadn’t been approved by the state’s weights-and-measures regulators. And in Vancouver, authorities required Uber to adhere to limousine-service regulations setting a minimum price of $75 per ride—a rule Kalanick told local media other car services ignored.

In each case, Uber and its executives responded aggressively, speaking to the media and using social media to mobilize customers to contact regulators and express their support for the company.

"Cambridge, MA home to Harvard, MIT and some of the most anti-competitive, corrupt transportation laws in the country," Kalanick tweeted after the incident in that city.

There and in D.C., the company vowed to keep operating and encouraged customers to tweet and to contact officials with their thoughts. Similarly, in Vancouver, Uber posted contact information for city and provincial officials, urging customers to tell them to "abolish taxi protectionism."

In many cases, these efforts seem to have worked: Soon after Uber mobilized its Boston-area base, Massachusetts Gov. Deval Patrick’s official Twitter account announced a change in tune, with regulators determining the GPS-based meters could be legally used, since they were under evaluation by the National Institute of Standards and Technology. In D.C., the city council amended its regulations to legalize the service after hearing from constituents.

Also in 2012, Uber introduced a lower-priced service dubbed UberX, using hybrid cars rather than luxury sedans to better compete with traditional taxis, along with SUVs, which cost more but could fit more passengers and luggage. In Chicago, the company that once boasted an experience superior to the common cab added ordinary taxis to its lineup.

"Everyone thinks that Uber is the anti-TAXI, in a battle against an old system, fighting for innovation, competition and free enterprise," Uber said in a blog post. "Though that makes for exciting and controversial headlines, it’s just not what drives us."

After some initial regulatory hiccups, Uber is also participating in a New York "e-hail" pilot, letting users summon the city’s iconic yellow cabs through its app.

At the same time, Uber’s has faced new competition from "ridesharing" services like Lyft and Sidecar that let ordinary people pick up fares in their personal cars, with rides arranged through smartphone apps. In some cities, Uber’s added a ridesharing component to UberX.

In California—where Uber’s resolved its disputes with state officials and new regulations legalize and regulate carsharing services—Uber’s reportedly offered Lyft drivers incentives to switch to driving for UberX and even run ads mocking the distinctive pink mustache logo Lyft drivers use to mark their cars. In other places, Uber’s worked to get customers used to its ridesharing feature by giving customers free rides, even as all of the ridesharing companies gear up for new regulatory battles over the service.

Even as Uber’s added lower-priced services, it’s faced persistent criticism that it’s an inherently elitist service, one of a breed of San Francisco startups catering primarily to the type of affluent young men who work for San Francisco startups. As a Digital Trends story pointed out, a promotion offering Uber helicopter trips to the Hamptons may not have helped the company’s image.

Uber’s also come under fire for its "surge pricing" system, where fares go up when there aren’t enough cars available to meet demand, such as on holidays like New Year’s Eve or, sometimes, during bad weather. Uber argues that raising rates brings more drivers onto the street, since they’re seeking a bigger payout.

"We don't just charge to make a buck though, we take a small fee of the transaction, but the vast majority goes to the driver so that we can maximize the number of drivers on the road," Kalanick wrote in a letter to an aggrieved customer he posted on his Facebook page. "The point is in order to provide you with a reliable ride, prices need to go up."

Critics say it may run afoul of state price-gouging laws and consumers’ ideas of fairness. After Hurricane Sandy struck the East Coast in 2012, Uber faced widespread criticism for instituting surge pricing and, for a time, paid drivers the surge rate while charging customers the normal cost. Uber reverted to its usual surge policies a few days after the storm hit, saying picking up the difference in fares cost it more than $100,000 per day.

Steven Melendez

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3Comments

Maybe the answer is to have far LESS taxes, fees, and regulations and let Uber and the car service companies compete on a level field. Regulatory schemes exist mostly to protect entrenched players by stifling competition. Sure, they sound noble and protective, but they always seem to keep new players out of the game.

Uber in unregulated fraud of a company that takes profits out of your local economy to offshore accounts. There are millions of GPS-enabled apps that allow user to see
his or his cars GPS movements - nothing astonishing in that. What's astonishing though, is that regulators that exist to regulate transportation businesses refuse to
regulate Uber. There is no way for your local car service to compete with Uber.... Your local car service pays fees, taxes, follows hundreds of regulations and just try
to skip one and see your license revoked and hefty fines sent your way, and - there is Uber - unregulated, competing for same passengers, paying no fees, avoiding taxes. "Free" market only that it isn't and regulators are making a huge mistake allowing this
status quo to exist and gather PR. I guess regulators want Google to regulate them...